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China Fund News Taylor

Brothers and sisters, sleepless night! The US non-farm payrolls data exploded, directly leading to an epic plunge in US stocks!

U.S. stocks plunged more than 900 points

Tonight's U.S. stock market suffered a rare plunge. Among them, the Dow plummeted more than 900 points, and the Nasdaq plummeted more than 3%! Friday's sell-off pushed the Nasdaq index into a correction range, and the Nasdaq fell more than 10% from its record high nearly a month ago. The S&P 500 and the Dow Jones Industrial Average fell 6% and 4% from their record highs, respectively.

Amazon's stock price plummeted by more than 10%The company’s second-quarter results raised concerns that big tech companies are overspending on artificial intelligence-related capital expenditures. The e-commerce giant’s revenue fell short of Wall Street expectations and issued disappointing guidance.

Intel plunged nearly 30% during intraday trading, marking the biggest drop since 1982.

The latest financial report shows that Intel's revenue in the second quarter of fiscal year 2024 was US$12.8 billion, a year-on-year decrease of 1%; the quarterly net loss reached US$1.6 billion, and the net profit in the same period last year was US$1.5 billion, a year-on-year loss. The company will suspend dividends from the fourth quarter of 2024, which is the first time it has suspended dividends in the past 32 years.Intel's CEO said second-quarter financial results were still disappointing and trends in the second half of the year were more challenging than expected.

In addition, Intel also announced that it would cut 15% of the company's employees, a total of about 15,000 people.This is Intel's largest layoff in history, showing that the chip company is committed to cutting costs as it suffers a performance slump, and the layoffs will be completed by November 15.

After the results were announced, many major banks lowered their target prices. Among them, Morgan Stanley and TD COWEN lowered Intel's target price to $25; Deutsche Bank lowered Intel's target price to $27; Jefferies lowered Intel's target price to $28. In addition,S&P placed Intel's rating on negative credit watch.

Apple's stock price rose 2% against the market trend, and its total revenue and iPhone business revenue in the third fiscal quarter were both higher than expected.

What happened behind the scenes?

The reason for the plunge in US stocks tonight is the unexpectedly cold U.S. non-farm payrolls report in July. Although market expectations for rate cuts have increased significantly, recession concerns have replaced the prospect of rate cuts as the dominant factor in the market.

Data released by the U.S. Bureau of Labor Statistics on Friday showed that U.S. nonfarm payrolls slowed more than expected in July, increasing by just 114,000 and the unemployment rate rose to 4.3%, which could heighten concerns that the job market is deteriorating and the economy may be heading into a recession.

The U.S. unemployment rate unexpectedly rose for the fourth consecutive month in July to 4.3%, the highest since October 2021, triggering a warning signal for a recession.

After the data came out, it directly led to a plunge in US stocks.

El-Erian, a well-known American economist and former CEO of Pimco, said that today's US non-farm payroll report as a whole is leading the market to express two concerns:Fears of a recession and concerns that the Fed is getting its policies wrong.

"This is what recession panic looks like," said Wasif Latif, president and chief investment officer at Sarmaya Partners. "The market is now realizing that the economy is indeed slowing, and the market is quickly realizing that the Fed may have made a mistake by not cutting rates. Historically, the Fed has tended to wait longer and ultimately push the economy into a slower growth zone. Obviously, they are data dependent, and now that the data is out, they may do what they need to do in September, but September is a little far away for the market, and the market is in a panic right now."In this environment, bond prices are expected to rise due to factors such as a slowing economy and investors turning to quality assets.

Some analysts said that the weak data in July is consistent with other data such as job vacancies and the employment cost index, which have slowed sharply in recent months. These employment data, coupled with some economic data this week that show that the economy is cooling, are likely to increase concerns that the Federal Reserve may have waited too long to start cutting interest rates, which is not good news for the Federal Reserve. Federal Reserve officials decided this week to hold off on cutting interest rates, but the surge in unemployment will increase concerns that they are behind the situation:Cutting rates too late could wreak havoc on the labor market.

Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said:The Fed made another policy mistake and should have cut rates at their meeting on Wednesday.

Goldman Sachs said U.S. nonfarm payrolls growth slowed more than expected and the unemployment rate rose to 4.3%. Goldman Sachs changed its forecast for the Federal Reserve toSince September, the interest rate has been cut by 25 basis points three times in a row.If the August non-farm payrolls report also shows a weak performance and confirms the slowdown in employment growth, then the possibility of a 50 basis point rate cut in September cannot be ruled out.

Citigroup economists expect the Fed to cut rates by 50 basis points at its September and November meetings, and by 25 basis points at its December meeting. They had previously expected the Fed to cut rates by 25 basis points at each of the three meetings.

After the non-farm data came out, the US dollar index fell by more than 1%.

The dollar continued to fall against the yen, hitting 146.41 at one point, the lowest level since February 2.

The RMB exchange rate once soared by 1,000 points, and the offshore RMB against the US dollar regained the 7.15 mark, reaching a new high since January this year!

Crude oil prices plummeted, and some analysts said that the non-farm data further made the outlook for economic growth and crude oil demand unclear. In the past four weeks, Brent crude oil futures and WTI crude oil futures have fallen by about 10%, setting a record for the longest consecutive weekly decline this year. Although tensions in the Middle East may affect supply, weak economic growth in major economies may curb oil demand, which will put pressure on oil consumption.

Panic selling in the stock market also affected the prices of gold and silver.